Wednesday, December 17, 2008

Potpourri

The TSX was down today due to technical problems and it threw me off. Whenever, I trade Canadian stocks such as gold, energy, agchem, I like to trade both exchanges. So, when TSX was down I got a little anal and missed the gold trades altogether. I managed to snap out of it in time to catch half of the Agchem play.

POT was a continuation play from yesterday's gap and extension. With a weaker $USD, gold, commodities have a chance to rally. Price rallied into the R-zone, consolidated, and moved out for one last wave. I drew trendlines on all of my 1 minute charts today because prices were extended after yesterday's 5% jump, and I didn't want to overstay the trades.

For many stocks with big moves following yesterday's FOMC, it didn't make sense for me to place my Fibs. over yesterday's trading range, because that would give me unrealistic targets.

The MS chart above, carved out a perfect cup & handle pattern. The normal measured move is 100% from the low of the cup to the base of the handle, however, today it stalled after closing above the R-zone and reversed, so I exited the trade.

Both JOYG and BUCY printed really wide opening ranges and here we used Trader-X guideline #4 for best results. This means you place fibs from ORH to ORL. Price consolidated in the R-zone midday and allowed for a low risk entry back up to the ORH, followed by a small extension.

As you can see from the 1 minute chart of JOYG, after taking a partial, price is far away from the trendline. Under normal market conditions, expect some sort of pullback or consolidation when price moves too far, too fast. This happens either through price or through time, or a combination of both like JOYG, which initially moved sideways (time) and then pulled back towards the trendline (price). BUCY consolidated the move more through time as it managed to hold the ORH EOD.

I was able to catch up move in AEM and SAY. Completely missed the bull flag in FSLR. I was keeping a watch on JOYG but missed that too. I see many patterns being formed but completely miss the entry point. Just trying to figure out how to get better at that. Unfortunately my trading platform's price alert system is not working properly on my system.

Some stocks move through the R-zone and head fake. But in the case of ENER, the candlestick pattern was pretty bullish and it was low risk on the 5 min. The R-zone represents pockets of congestion (support/resistance) from the past, so presumably, if price can move out of the R-zone, it can move to next level with relative ease. If it struggles, there's a problem and you want to keep it on a tight leash.

If we compare POT with ENER for example. POT has ripped 30 points in two weeks vs. ENER which has done nothing throughout the market bounce. So POT, you want to exit at next Fib. extension because it has had a fast and furious run. ENER, on the other hand is just getting started, so partial at next level and see what develops.

Not sure exactly what your modus operandi is but you need to make things as simple as possible.

Are you using a fixed watchlist, if so, sort the list by % change several times a day so that you can focus on the outliers. The outliers become the focus list, never mind the rest. Check the focus list every 10-15 minutes.

Call your platform provider and find out why the alerts don't work. You need maximum performance from your platform, because there's too much money at stake, if you are missing good setups.

Very useful charts Jamie!I have a question regarding your MS trade: I see the C&H pattern clearly. Now, if I follow the trade on the 5min chart, I can see that after breaking out of the base, MS prints an engulfing red bar with upper tail that closes just a bit below the base. In my current state of mind, it would have been difficult to stay in the trade at that point. The following two bars are beautiful hammer-like bars, so at that point I would had probably regretted exiting the trade (LOL). In the past you encouraged me to think about "trading not to loose" and "trading to win" mentality. The tough part about the trading to win mode (and leaving the original stops in place) is that one needs to trust the setups and as a less experienced trader, it is really hard to trust what you do not know for sure is going to work (catch 22). My solution to that is to take it easy with the risk, do tons of study to get to know the setups I want to trade, mix paper trading with real trades, and focus on understanding price action. Is there anything else that one can do?Sorry for the very long post (almost stream of consciousness) and if it does not make sense, don't worry. C'est la vie. Thank you!

According to Malcolm Gladwell in his new book "Outliers, The Story of Success" (#1 NY times bestseller), it takes 10,000 hours of dedicated study and practice to become a master at something. What do The Beatles, Bill Gates, Mozart, and Canadian Hockey Players have in common, along with talent and ambition, 10,000 hours of dedicated study/practice.

I see from reading your blog that you are dedicated, curious and ambitious. I know you will succeed by studying and working out the best setups, entries and exits to suit your personality.

With respect to the MS trade, I use the outside 15 min. bar as the stop and I have a very high success ratio if all of the other parameters such as price above MAs, volume contraction in the handle, etc...

If you prefer to buy pullbacks/retests, like you did today, then maybe that's the answer. It might work best now because we're in a bear market. In bull markets, waiting for retests will lead to some missed trades. The practice and study of endless charts will provide the answer.

I think, at the beginning, you want to focus on few setups ( 1 or 2), establish how reliable they are under different market conditions and go from there.

Jamie,Nice trades. noticed the hot shipper group went nuts at the open and the golds reversed latter on in mass. Nothing like group action: nm drys gnk dsx exm tbsi//abx nem gg rgld ego auy gold around 10:30 est. Also Fib retracement from ORH to YC(yesterday's close)works well. Check joyg bucy. When anal DANCE in front of the computer.

I took ABX trade, double my usual position. Thanks to your market analysis which gave me confidence. Went SDS long when it broke PDH and retested it. Would have been a good day if I had not made a dumb mistake of overlooking volume in MS trade. Monetary wise - a good day no doubt.

Do you often add upgrades/downgrades in your WL? Thaks for the advice of sorting the WL by % change. I am implementing that.